Business Strategy, Innovation and Technology

I was just reading Tim Kastelle’s post “Our Job is to Invent the Future” on his great blog which reminded me about the primary need for anyone who is in business to be leaders rather followers.

Tim’s post was seemingly in opposition to another book I was looking through this afternoon called “Making Strategy Work (Making Strategy Work (Amazon Link)), a compilation of essays containing a section on “testing before doing” by Robert Sutton of Stanford U, which stated the need for evidence before action. Now as my previous post stated I’m a big believer in scientific method or “evidence based management” (EBM) where it is needed, but I really think that people need to understand where you can measure something, and where you need to make a logical jump that no matter how much market research you do, will never come up in a focus group.

Robert Sutton’s example is of the CEO of 7-Eleven, upon walking into one of his stores and receiving bad attitude from the clerk spending millions of dollars on an outstanding service program, including awarding one of the 7-Eleven franchisees who had perfect service ratings $1 Million dollars and another bunch of initiatives, but after the fact realising that customers of 7-Eleven didn’t really care about the interaction with the employees, rather they just wanted to shop as quickly as possible. In this case, a really simple bit of market research such as a COMB analysis would’ve pointed out the misdirection of effort towards something that, while important, wasn’t really the greatest concern of the organisation.

Although analytical approaches such EBM are completely the right way to go when performing analysis in domains that aren’t new to the world (like customer service), when you’re playing a completely new game, you need to take some leadership rather than following. Last night I was watching Mad Men season 3 where the inimitable Don Draper is faced by focus group market research which opposed his idea for an ad campaign for cold cream but he went with it anyway, stating that if someone was to hold another focus group after his campaign ran for a year, it would back him up. I really thought about the creative leadership that CEOs like Jobs with the iPad who created products, that on first view and market sentiment wouldn’t have passed traditional market research, but through focussed leadership were given the go, and found success (admittedly this paragraph is begging for a post on ethnography and its importance in new product development and research).

Breakout successes that construct or reinvent market segments like the iPad, or Netflix, or Zipcar will never come out of market research or focus groups. These products require creative leadership, someone who sees a market need before anyone else does, even consumers. Solely following market whims (for it is an incredibly useful skill) usually results in firms who won’t ever be outstanding innovators. For companies to get really successful they need to understand when to be research and market driven, and when to let creativity rule.

When I’m thinking about any subject I usually like to organise my thoughts around what the main parts of a subject are. My day job is consulting, mostly in strategy, and as a field strategy has some order as to what it include, if you take some financial analysis, economics, and marketing, add in organisational and system dynamics you’ve got a pretty good core toolkit for a strategist. Recently Tim Kastelle had a great post on what defines innovation, and Hutch Carpenter on blogging-innovation has developed 25 definitions of innovation, but what is the core toolkit for an innovator? I’ve studied technology and innovation management at uni, but didn’t quite feel that I learned the whole deal, and since then I’ve put a bit of brain power to what skills make an innovator and came up with the following:

Design thinking and creative problem solving – Design thinking is becoming super cool at the moment, and although I don’t think an MFA is going to save your company any more than an MBA was 20 years ago, understanding the concepts of design and “design thinking” are a good start for making a company more innovative and creative.

Social science/market research – Personally, I think that the quantitative and qualitative arts of social science, and the business focussed version – market research, provide the tools and techniques to understand important stakeholder groups and use this understanding as an important input into innovation.

Business modelling – Business models have emerged as one of the most important aspects of capturing innovation within organisations. Learning the art of business modelling provides innovators with the skills to structure businesses around innovations and hopefully capture enough value (i.e. money) to keep the doors open.

Research and development – Whether scientific, engineering, product, or software R&D, I think that all innovators have to understand some of the fundamentals of research and development. Although, I think that R&D management has a long way to go (i.e. “money != innovations”), there is some good ground to be made by learning the systems of research, including: peer review, knowledge management and collaboration, and the systems of new product development.

Project and portfolio management – This might seem a bit operational, and it is, but as almost all innovations are project based, and as all innovations are risky, unless you can afford for a company to go down due to one misfire, you’ll need a portfolio of them. There is a huge literature on project and portfolio management out there (the PMI is a good place to start) and it’s worth looking at to provide some rigor to budgetting, resource planning, risk management and valuation of organisational innovation programs and innovation portfolios.

Intellectual property protection – Innovations are usually built upon a core of valuable and unique knowledge. While you might not neccessarily need own that core to capture value, if you do, understanding the mechanisms for protecting intellectual property, both legal and non-legal (not illegal, through business models and the like) is important for ensuring the payoff on hard R&D work.

Finally, there are a few others, but I’m unsure about how “core” they are, including:

Evolutionary economics – underpinning all innovation theory is Schumpeter’s evolutionary economics, although I wonder if the economist view of innovation vs the innovation studies view of innovation is developing into a similar schizm to the military and business strategy schizm we see today (although I’m sure you still see the occasional copy of Von Clauszwitz on a CEO bookshelf).

Social network analysis – recently trendy, and surprisingly useful for understanding innovation networks and the like, though I wonder how useful it is for the innovation practitioner. I think the combination of SNA, system dynamics, and epidemiology would make a pretty potent innovation dynamics toolkit, although I don’t know if that’s out there at the moment.

Community building – This is hard to define, and while there are a number of books out there on building web communities, I don’t really know how defined it is as a discipline in it’s own right and whether it’s truly core to innovation.

There you go, of course, any fully rounded business leader should be comfortable with both strategy and innovation, as well as the essential operational and hard to define leadership skills. But that’s my thoughts on what makes an innovator. Any feedback?

I’ve recently been looking into interesting alternative ways of facilitating idea generation for organisations and came up with four tool types that I think hold promise for creating alternative mechanisms for idea generation.

Idea generation is a key activity for many organisations, but the meeting driven (and meetings are the source of most ideas) idea generation model doesn’t always work for a few reasons:

Location – firms are increasingly distributed and new work options are only going to increase the physical separation of employees

Time – everyone knows arranging meetings with all important stakeholders can be difficult

Attention – everyone in the world can generate ideas, but can they generate ideas at 10:30 on tuesday the 4th of August? Forcing ideas into a tiny window can be troublesome (although admittedly pressure sometimes helps)

The following tools (with examples) have promise, keep reading at the end for some good general tips for electronic idea generation (ideation in innovation parlance).

Mindmapping

Everyone has come across mindmapping at some point. A mindmap provides a simple way to develop a hierarchy of items around a common theme, and can be successfully used to generate a bunch of ideas quickly. Remote collaboration for mind maps is something that’s popped up in the web2.0 revolution a few years back and makes mind maps a great collaboration tool. I’ve personally used the online tool mindmeister pretty successfully (they even have a few templates for SWOT generation and the like), although mindjet has recently added online functionality (it’s a little pricey though).

When using mindmapping for ideas, make sure you have your scope defined (or visibly open ended) and summarised in the core of the map (the center element). If you want some structure around ideas, remember to insert a blank tree, and an example tree. Mindmeister allows for notes to be attached to nodes and the like, which will make describing your map easier.

Jamming

A jamming “platform” provides an online mechanism for individuals (usually invited, but there are community and open models) to create ideas, comment and tag ideas and vote on ideas (usually using some form of “up” or “down” voting, like digg), plus a back office suite for managing stats, keeping up with participants etc. This has been used for great effect by IBM for a number of years, running jams with 100’s of thousands of participants (they have a website that talks about their experience). If configured correctly, an jam is a great ideation tool, which can generate a huge pool of ideas in a reasonable timeframe, although you’ll probably need some help to set up your first one (it hasn’t really hit the b-schools as a mainstream tool)

The main products that I’ve come across are BrightIdea’s Webstorm, which I think is more for the open or community jam, and elguji software’s ideajam. I’ve only seen a jam using the elguji platform so I can’t vouch for other platforms, but it was very successful.

If you’re in Australia, check out Vulture Street for jam services and running a jam in your organisation.

Microblogging

Microblogging has taken off massively in popularity publically, and is starting to make headway in businesses as well. Developing ideas with microblogging can be as simple as asking questions (possibly incorporating #hashtags to facilitate gathering stats) and prompting discussion in whatever channel your organisation uses (set one up before your next strategy session).

There are a number of microblogging platforms, but for my money Socialcast is the winner in features for a pure microblogging/activity-stream application (I don’t rate yammer), although a lot of webapps provide some form of activity stream, so you might not want to have too much doubleup in your organisation. For full fledged options that include wikis and more complete portal services, look at Jive’s offerings or SocialText.

Google Wave

Google wave is a bit of an enigma, dependent on which side of the fence you sit on it’ll either change everything, or die a quiet death. I personally think it has the potential to change a lot in organisations, but people are having trouble finding a particular use in their organisations that isn’t already covered by other collaborative platforms (gDocs for example).

Using google wave for idea generation is a no-brainer though, they even have a guide that gives some good (albeit short) tips on using it for brainstorming. I think for best success you need an online moderator/facilitator who will manage the development of a wave, being cognizant of useful questions or frameworks to incorporate in a live wave.

General tips

I think that online collaboration isn’t going to fully supplant face-to-face time in an organisation, but I think that organisations creating new idea generating channels can only be a good thing and they may provide mechanisms to engage employees (and other stakeholders), improve the quality and breadth of ideas, and occasionally break down the internal silos that organisations face. In general though you need to be careful when using these online tools, as a start I suggest thinking about the following items:

Have a clearly defined purpose, even if that purpose is free form idea generation. If you need detail, but don’t know where to start consider bootstrapping your ideation process though a couple of phases (step one: what should we ask, step two: ask the question)

Define the ground rules of the discussion.

Define your audience carefully, should it be staff (or a subset), will you include customers, suppliers, or will it be open to the general public

Bank on time to motivate and cajole participation, particularly if this is new for your organisation. If there are particular individuals who you absolutely need to contribute, spend an appropriate amount of time on them

Just because it’s electronic, doesn’t mean it’s not a conversation, treat it as such

Be aware of your social capital when asking questions, if you’re the CEO, you’re going to get a lot more attention than an line manager. If you need more social capital, recruit some sponsors before you start. (for good discussion on this look at this post from Mitch Joel).

Finally, without putting thought into how you are going to filter, select and collate these ideas (even the rejected ones), you aren’t going to make the most of your efforts and you are going to waste a lot of people’s time and make them unhappy and disengaged for the next time you want ideas. This is of course one of the key components of innovation management (see here, for good commentary).

I was just looking around for what was going on in the business model(ling) world right now and came across this terrific looking book orchestrated by a team including Alexander Osterwalder (by the way I discovered his website and the Business Model Alchemist blogs are also great) and 470 (!!!) other authors.

A Quick Synopsis (from the webpage)

Disruptive new business models are emblematic of our generation. Yet they remain poorly understood, even as they transform competitive landscapes across industries. Business Model Generation offers you powerful, simple, tested tools for understanding, designing, reworking, and implementing business models.

Business Model Generation is a practical, inspiring handbook for anyone striving to improve a business model — or craft a new one.

I suggest you download the free 72 page preview, it’s actually useful in its own right, and beautiful to boot!